What in the world is an NFT?
Every once in a while a concept or a phrase or a thing comes out of nowhere and is suddenly everywhere: in our Twitter feed, in the news, in casual conversation, on 60 Minutes. Non-fungible tokens (NFTs) are exactly that: one second no one knew what they were and then suddenly, they’re trending. But the truth is, even though they are being talked about a lot these days, most people still have no idea what they are or who they’re for. Let’s see if we can answer both those questions.
OK, so what IS an NFT?
Since the explosion of the digital age, tons of original work exist only in the creator’s computer. Music, for example, can be created entirely online. The original version of your favourite cat meme only exists on the computer of the person who made it. Same for video games. And social media content. Twitter CEO Jack Dorsey famously sold his first ever tweet as an NFT for close to US$3,000,000. Another NFT sold at auction for close to US$70,000,000.
So it’s pretty easy to see how something digital can also be valuable, but until now, just how valuable was hard to assess. Even sorting out who owns a digital work is hard. How many meme creators can you name? Likely it’s close to zero because digital creations are copied and shared in seconds, worldwide, at no cost, without credit. And with all that publicity, the person who created this work that’s copied and posted on every FB page, seen by millions (or billions), makes exactly zero dollars. Enter non-fungible tokens.
Something that is non-fungible is so unique, it cannot be traded for something else, even if it seems similar. Jack Dorsey’s first tweet cannot be traded for your last tweet because although they seem the same, they are valued differently. Jack is Jack. We are not Jack. The same holds true for a diamond. Or a rookie Wayne Gretsky hockey card.
Without getting into the complicated world of cryptocurrencies, an NFT is a token that people create (or mint) of their non-fungible work, usually a collectible of sort – artwork, for example. This token is then put on a public ledger of sorts (“blockchain”), which authenticates ownership. Only one person can own an NFT at one time so if you’re the owner, your name will be attached to the NFT.
Who are NFTs for?
Now that you have a very basic idea of what an NFT is, you’re wondering whether you have some artwork or music or a meme you can offer for millions of dollars. Well, likely not. Like collectibles in general, the value of these unique works is based on what people are willing to pay for it. So when Maple Leaf star Austen Matthews puts a whole bunch of digital stuff up for auction on an NFT marketplace, the public decides its value. But if you’re not Austen and you’re not Jack, your digital art may not have any value to the public, even if it’s great. The NFTs that attract the most attention, and therefore the most money, are created by personalities – often big-time personalities, with massive followers and fans who put a high value on anything connected to them. People will often pay just about anything for a piece of someone famous. NFTs let you do that – own a part of someone well known. Sort of.
And now for a big surprise!
Not only are you unlikely to make money from your own NFT, but if you decide you want to own someone else’s NFT, we have a bit of a surprise for you: If you spend $30 or $3,000,000 on an NFT, you may become the registered owner of the NFT (yay) but not the owner of the original work (boo). The rights to the actual work may remain with the original owner. What you get is ownership of the proof of authenticity of the original work, similar to owning the deed to a house but not the house itself. Thankfully, this is changing, with more people offering actual ownership in the works, but be careful. And talk to us first!
So what’s the fuss about?
It’s very early days. NFTs are expanding to include all kinds of fun, collectible and affordable items, with more rights attached when you acquire one. Or maybe NFTs are a fad – although they said that about digital music, streaming, and the internet
Legal Plan and NFTs
If you have your eye on something in the NFT marketplace, get in touch with us before you invest. We can help you sort out exactly what you are getting (and not getting) for your money by reading the small print on the terms. And we’ll explain cryptocurrency to you. Avoid disappointment and give us a call.
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